CANNAINVESTOR Magazine January / February 2017 - Page 92

The Challenges in Launching a National Marijuana Brand

There are numerous challenges in establishing a national marijuana brand. Products need to be produced and sold in a state in compliance with each state’s marijuana licensing requirements and regulations. Since marijuana is illegal federally, this eliminates producing a product in Colorado and shipping it to Oregon, Washington, or anywhere else.

Entrepreneurs interested in launching a national brand have two choices. They may be able to obtain a production license in an individual state, which would allow them to manufacture and distribute their products in that state, or, they can seek to license their brand and products to licensed growers or processors on a state-by-state basis.

Licensing a brand to a grower or processor creates its own set of challenges. Key for the brand owner is to have influence and control over the manufacturing process to ensure quality control and consistency of the final product.

A brand with a good formulation, excellent quality control, and consisting of one or more popular products can be destroyed by a licensee in a state who produces and sells substandard products. With the popularity of social media, poor quality products in the marketplace in one state can destroy an entire national brand.

The Difficulty in Obtaining Shelf Space

In many states, obtaining shelf space in a dispensary or retail store in is a challenge. In states that allow integrated ownership of grow facilities, processors and retailers or dispensaries under common ownership, a new brand may find itself competing for shelf space with the store’s proprietary product line.

Frequently, the budtender is encouraged by the store’s management to sell its brand, as it likely provides a higher profit margin. This may create a barrier to entry for new brands, somewhat similar to trying to convince Walmart to carry a new line of cola, when they already sell Coca-Cola and Pepsi products as well as their own private-label cola brand.

Celebrity Brands

Celebrities including sports figures, movie stars and musicians have been used to sell products for decades. Marijuana is the latest “hot” item for celebrities to market.